For all the talk of economic booms, financial conservatism held true in the urban market, says PAUL COMRIE.

Property trends for the 2007 fiscal year shows a drop in home loans, despite Chennai’s bullish real estate sector. For all the talk of economic booms, financial conservatism held true in the urban market. While banks currently demand 15% as down- payment for domestic loans, Mathew Joseph HDFC’s Regional Manager finds the reality otherwise. “We get anywhere between 40-45% of all home loans paid up front from personal savings. So in the majority of home loans we service roughly 60% of the actual debt owed.”

The median loan for the metro area in the past year stood at roughly 20 lakhs. Bank assume on average 60% percent of the total property value, which leaves a monthly mortgage payment of Rs 20-25 thousand. Assuming the cost is shouldered by one income alone, that individual would have to earn between Rs 35-40 thousand per month.

“Of course we have many properties in the lower income sector also,” says Joseph. “That’s the reason for the 20 lakh average. We have any number of mortgages available for those able to pay 1 crore or more sometimes.”

Even so, others cite that only 25% of the domestic market is even above 15 lakhs. That means an often unmentioned sub-category of earners make up the 75% bulk of local domestic investors. These consist of inherited plots of land, or the risk-taking market savvy who invested wisely several years back when land was more affordable. For this category the average loan falls between 5-6 lakhs.

On average, land prices on the outskirts of the metro area fall somewhere between Rs. 1,000 to Rs. 1,250 a square foot. Rs. 9 to 10 lakhs is then the required sum in order to complete a small house of only a thousand square feet not counting the land value or the price it would cost to get in the market to begin with. But this conservative level of home ownership needn’t be the case, explains one banking executive on condition of anonymity.

“We’re absolutely flush with cash. We’re getting so much FDI we can’t put it all out into the market at one time. We need more risk takers, more entrepreneurs.”

But others cite that the Indian Federal Reserve is playing a cautious hand, and keeping state level banks on a similarly tight rein. While most Indian bank officials claim that a U.S. housing meltdown won’t trouble the local economy, they’re conservative nevertheless.

“We have all the investors we need,” says Joseph. “If ever we find ourselves in a situation where we need to be more aggressive, then we seek out partners who are looking for new projects or investments. It’s that simple.”